Real estate has seen many ups and downs over the years, the ongoing pandemic has affected the sector adversely too. With the economy slowly re-opening and both the builders and government offering a platter to the buyers with exclusive and pocket-friendly offers. Now people are re-thinking about investing in real estate.
Amidst the changes, it seems that the real estate sector is emerging from the distress and adapting to the new normal.
So is this the year to really plunge into such investments? Here’s why many believe that investing in 2020 is the right time.
The foremost reason is interest rates are all-time low now. The most evident impact of the interest rates on real estate value is in the derivation of discount or capitalization rates, as they are equal to the risk-free rate plus a risk premium.
There is stamp duty reduction. It's a big relief for many home buyers. The Maharashtra government has recently announced a reduction in stamp duty rates from 2 to 5 per cent. This reduction could amount to be saving approximately around 2 to 3 lakhs for a home buyer, depending on the price of the property.
Developers offer freebie and stamp duty exemption. Developers are offering good unique payment plans and to overcome the issue of inventory overhang and bolster sales.
Demand and supply both aligned towards the ready unit. All the developers at present have a blinkered vision of completing their ongoing projects and now selling out ready to move in units.
Technology is reshaping the industry. The digital platform is helping out to align their business in the market. As lockdown has hampered site visits on a large scale.
Real estate- a tangible and safe investment. As the home buyers are planning to buy a house in Maharashtra here’s the good news, developers registered under NAREDCO have decided to pay the stamp duty on behalf of the home buyers.
But before fully jumping into investing it's important to understand some areas where you’ll need to exercise appropriate caution and do your due diligence.
Real estate requires hefty capital. To get started you’ll need the down payment plus closing cost and update the property to maximize income.
After owning land, you need to spend time learning and managing the property itself. Real estate needs a lot of time and attention to put in the order for the buyers.
Real estate is a long time investment. It should be bought with a long-term strategy. You are buying a tangible asset that can’t be quickly liquidated for cash if you need emergency funds. It can be problematic sometimes. At certain income levels, some of the tax benefits no longer apply to the buyer in real estate.
Following are the risks of investing in real estate :
- Buying wrong property at the wrong time
- Increasing liability for accidents that may occur at the property
- Getting overleveraged. This is a pitfall that brings down many real estate investments.